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MTBiz November 2012

MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Signature content of MTBiz is its Article of the Month (AoM), as depicted on Cover Page of each issue, with featured focus on different issues that fall into the wide definition of Market, Business, Organization and Leadership. The AoM also covers areas on Innovation, Central Banking, Monetary Policy, National Budget, Economic Depression or Growth and Capital Market. Scale of coverage of the AoM both, global and local subject to each issue.
MTBiz is a monthly Market Review produced and distributed by Group R&D, MTB since 2009.

MTBiz November 2012

2.
NAME OF SECTION
MTBiz
CONTENTS
NaƟonal News
04
InternaƟonal News
08
MTB News & Events
12
NaƟonal Economic Indicators
14
Banking and Financial Indicators
15
DomesƟc Capital Markets
16
ArƟcle of the Month page 02
InternaƟonal Capital Markets
18
BANGLADESH IN INTERNATIONAL TRADE:
A COMPARISON TO WORLD & COMPARABLE ECONOMIES
InternaƟonal Economic Forecasts
19
Enterprise of the Month
20
AssociaƟon of the Month
21
Contemporary Knowledge
22
Economy Outlook
23
CSR AcƟviƟes
24
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MTB Group R&D
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3.
ARTICLE OF THE MONTH
BANGLADESH IN INTERNATIONAL TRADE:
A COMPARISON TO WORLD & COMPARABLE ECONOMIES
Since Globalization of International Trade expanded, diﬀerent
economies started reducing tariﬀ barriers to foreign products and
easy access to their markets. Certainly it increased total Global
International Trade Volume and resulting less priced products to
end consumers. However, the more economies opened up, the
more, they became part of a virtual single economy and therefore,
a systemic risk has arisen to show, impact in one economy spreading
across the whole system and worldwide. For example, many
countries got access to large developed economies like US and EU
and their export income grew than ever before and gradually their
GDP dependency on export to those countries were dependant and
hence vulnerable to any problem to the importing countries.
markets are now challenging the titans of the Fortune and Forbes
lists.
Since the Great Recession of 2007, the world has seen declining
growth rate of the World GDP. As of Q3, 2012, EU and US are still
suﬀering and WB and UN have forecasted lower growth for these
economies. China has still been able to keep its growth rate to
some extent stable, yet, analysts suggest that, China may fall on
its GDP Growth in near future, by 2020. According to WTO, World
trade expanded in 2011 by 5.0%, a sharp deceleration from the
2010 rebound of 13.8%, and growth will slow further still to 3.7%
in 2012, WTO economists project. They attributed the slowdown to
the global economy losing momentum due to a number of shocks,
including the European sovereign debt crisis.1
Over the past 20 years, there has been a dramatic rise in international
trade. From a period of stability in the 1980s, total global exports
accelerated from just under 20% of GDP in 1990 to reach 30% by
2010, meaning that, on average, world trade grew by around two
percentage points faster than world GDP.
This paper primarily examines the international trade position and
its trend of Bangladesh. Lately, an impulse is being sensed and
much talk is loud in the media about declining import and especially
import of capital machinery to Bangladesh. Secondary objective of
this paper is to assess the length and depth of this assumption of
declining trend in capital machinery as well as, to explore reasons
behind it, if any. Finally, this paper would examine and compare
trend of International Trade of Bangladesh to World’s International
Trade as well as to the Asian economies and to the LDCs to ﬁnd
how Bangladesh is performing in International Trade compared
to Region, LDC cluster as well as whole world, and to ascertain
whether current trend of International trade of Bangladesh is better
compared to its Region, LDC Cluster and the globe.
The degree of change — if it comes to pass — in both scale and
direction of trade will have a profound impact on the competitive
environment for all companies, wherever they are located around
the world.
INTRODUCTION
Growth lies at the core of business. Reaching out to customers with
the speed and ﬂexibility to best meet their needs and managing
the cost base to deliver a sustainable return is the central challenge
of management. That challenge has a growing global dimension:
entering new markets, optimizing operations across borders,
ﬁnding the right value and cost mix, and seeking skills and funding
from the global pools of both capital and talent. No longer just a
trend, globalization is now the dominant business environment.
Trade lies at the heart of globalization. The pursuit of growth has
converted businesses into natural pioneers growing beyond their
current competitive and geographic boundaries. When free to
compete, businesses from all countries have crossed borders to
seek new opportunities and to pose new competitive threats to
domestic players. But companies from some countries have been
disadvantaged — by politics, regulation or lack of resource — and
for much of the past century, companies from the developed world
have been the most active in taking the largest share of the new
global market.
New patterns of trade have clearly emerged in this era. The sources
of raw materials and low-cost workers have now become highly
skilled and wealthy markets in their own right. Today, there is a net
redistribution of wealth away from the developed economies — a
process accelerated by the ﬁnancial downturn and the economic
recession that it has caused. Companies from those rapid-growth
1 World Trade 2011, Prospects for 2012, May 10, 2012
2
MTBiz
A great rebalancing of the global economy is therefore in motion.
We are witnessing a surge of investment from West to East, some
of it speculative, but much of it the result of individual business
decisions. Yet this ﬂow of capital is not the only force behind the
great opening up of the global economy. There is also East to East
and growing East to West dimension of trade ﬂows. In parallel to
high volume of trade to India and China, there lies signiﬁcantly a
greater increase that is happening within regional blocs closer to
home markets.2
This exceptional growth has been driven by a variety of factors: Lower
trade barriers, Regional trade agreements, and the active directives
of the World Trade Organization. Other factors, behind the growth
include, Falling costs of global transport and communications, and
Financial innovation, deregulation and the opening of markets such
as China and Russia to foreign companies.
THE PROMISE AND PERIL OF GROWTH
PROMISE OF GROWTH
The rising demand for products and services tailored to Asian
consumers will have a diverse impact on intra-regional trade and
market sectors. Every rapid-growth market has its own unique
characteristics that create market sector specialization. Following
section outlines speciﬁc specialization of the Asian markets to
grow:
Emerging, or rapid-growth, markets will continue to surge
in importance between now and 2020. Although growth of
demand will primarily be concentrated in Brazil, Russia, India
and China (the BRICs), there is also a new wave of emerging
markets appearing on the horizon.
Strong income growth in rapid-growth markets means that ﬁnal
demand — as opposed to production-location decisions — will
increasingly drive trade patterns into and between emerging
markets.
Regional companies will need to align and integrate a
strong talent management approach with their business
performance.
Goods trade will predominantly be in machinery and transport
equipment.
Information and communication technology (ICT) equipment
will account for most of the growth, although South Korea’s
shipbuilding industry will also expand rapidly.
Exports of lower value-added products, including clothes and
shoes, will also continue to increase.
Service exporters will seek to satisfy fast growing demand
within Asia-Paciﬁc.
2 Jay Nibbe, Ernst & Young; The emergence of new pa ern of International Trade;
published in collaboration with Oxford Economics

4.
ARTICLE OF THE MONTH
TRENDS IN INTERNATIONAL TRADE: THE WORLD
Four years after the eruption of the global ﬁnancial crisis, the world
economy is still struggling to recover. During 2012, global economic
growth has weakened further. A growing number of developed
economies have fallen into a double-dip recession. Those in severe
sovereign debt distress moved even deeper into recession, caught
in the downward spiraling dynamics from high unemployment,
weak aggregate demand compounded by ﬁscal austerity, high
public debt burdens, and ﬁnancial sector fragility. Growth in the
major developing countries and economies in transition has also
decelerated notably, reﬂecting both external vulnerabilities and
domestic challenges. Most low-income countries have held up
relatively well so far, but now face intensiﬁed adverse spillover
eﬀects from the slowdown in both developed and major middleincome countries. The prospects for the next two years continue to
be challenging, fraught with major uncertainties and risks slanted
towards the downside.
The slowdown is synchronized across countries of diﬀerent levels of
development. For many developing countries, the global slowdown
will imply a much slower pace of poverty reduction and narrowing
of ﬁscal space for investments in education, health, basic sanitation
and other critical areas needed for accelerating the progress to
achieve the Millennium Development Goals (MDGs). This holds true
in particular for the least developed countries (LDCs); they remain
highly vulnerable to commodity price shocks and are receiving
less external ﬁnancing as oﬃcial development assistance (ODA)
declines in the face of greater ﬁscal austerity in donor countries
(see below). Conditions vary greatly across LDCs, however. At one
end of the spectrum, countries that went through political turmoil
and transition, (like Sudan and Yemen) experienced major economic
adversity during 2010 and 2011; while strong growth performances
continued in Bangladesh and a fair number of African LDCs.
Sharp slowdown of world trade
After plunging by more than 10 per cent in the Great Recession
of 2009, world trade rebounded strongly in 2010. Since 2011,
the recovery of the volume of world exports has lost momentum.
3 Lou Pagnutti (2012), Asia-Paciﬁc Area Managing Partner, Ernst & Young
140
Jul-2012
Jan-2012
Jul-2011
Jan-2011
Jul-2010
Jan-2010
Jul-2009
90
80
Jan-2009
130
120
110
100
Jul-2008
The second, a move up the value chain too quickly by one country
over the others in the region, could reduce intra-regional trade,
a key driver of overall regional trade. For example, if China were
to produce more high-tech products, its demand for parts and
components from other Asian countries would decrease. The
economies of East and Southeast Asia would be negatively aﬀected
in terms of exports. On the other hand, the economies relatively
unaﬀected by this scenario — those prospering from the void in
production left by China — would be RGMs (Rapid Growth Markets)
with strengths in other manufacturing segments.
Emerging economies
World
Developed economies
Jan-2008
The ﬁrst looks at a faster-than-expected expansion of Asia’s middle
class, which would drive an increase in consumer spending,
producing a virtual circle of growth. The higher demand for
products would trigger higher levels of inter-regional trade,
stimulating export growth. This would lead to increased investment
in productive capacity, sparking the creation of more jobs. More
jobs would attract the rural population to cities, swelling the ranks
of the middle class.
Index January 2006 = 100
160
150
Jul-2007
Lou Pagnutti3 thinks, while there are clearly winners in the expansion
of RGMs, potential outcomes can have unintended consequences,
which he narrates in two potential alternative growth scenarios.
World Merchandise Exports Volume January 2006 – August 2012
Jan-2007
POSSIBLE PERILS OF THE GROWTH
Jul-2006
Key downside risk scenarios are a US recession, a hard landing
in China and a second global ﬁnancial crisis triggered by
Eurozone defaults.
Growth of world trade decelerated sharply during 2012, mainly
owing to declining import demand in Europe, as the region entered
into its second recession in three years, and anemic aggregate
demand in the United States and Japan. Developing countries
and economies in transition have seen demand for their exports
weaken as a result.
Jan-2006
Economic growth will be slower in advanced economies, but
the US and Eurozone countries will remain important markets
for exporters.
Source: CPB Netherlands Bureau of Economic Policy Analysis rebased by
UN/DESA
The monthly trade data of diﬀerent regions and countries showed
a clear sequence of the weakening demand that originated in the
euro area transmitting to the rest of the world. Import demand
in Greece, Italy, Portugal and Spain started to decline in late 2011
and fell further during 2012, but the weakness in trade activity has
spread further to the rest of Europe as well, including France and
Germany. In tandem, imports of the United States and Japan also
slowed signiﬁcantly in the second half of 2012. East Asian economies
that trade signiﬁcantly with the major developed countries have
experienced commensurate declines in exports. For example,
the Republic of Korea, and Taiwan Province of China registered
considerable drops in exports during 2012. China’s exports also
decelerated notably. Further down the global value chain, energy
and other primary-exporting economies have seen demand for
their exports weaken as well. Brazil and the Russian Federation,
for instance, all registered export declines in varying degrees in
the second half of 2012. Lower export earnings, compounded
by domestic demand constraints have also pushed down GDP
growth in many developing countries and economies in transition
during 2012. This has led to ﬂagging import demand from these
economies, further slowing trade of developed countries. At the
same time, a rise in international protectionism, albeit modest, and
the protracted impasse in the world multilateral trade negotiations,
have also adversely aﬀected international trade ﬂows. In the outlook
for 2013 and 2014, the continued weak global growth outlook and
heightened uncertainties lead to expectations that world trade will
continue to expand at a rather tepid pace of 4.3 per cent in volume
terms in 2013 and 4.9 per cent in 2014, compared to 3.3 per cent in
2012 and 6.8 per cent during 2005-2008.
Uncertainties and risks
The baseline outlook presented above is subject to major
uncertainties and risks, mostly on the downside. The economic
crisis in the euro area could continue to worsen and become more
disruptive. The slowdown in a number of large developing countries,
including China, could well deteriorate further, potentially ending in
a “hard landing”. Geopolitical tensions in West Asia and elsewhere
in the world might spiral out of control. Given dangerously low
stock-use ratios of basic grains, world food prices may easily spike
with any signiﬁcant weather shock and take a toll on the more
vulnerable and poorest countries in the world. The discussion in
this section focuses on the likelihood of the occurrence of the ﬁrst
three of these risks and what impact there would be on the global
economy should they materialize.
to be continued to next issue
MTBiz
3

5.
NATIONAL NEWS
FINANCE AND ECONOMY
Bangladesh’s GDP to slow to 6.1pc: IMF
Bangladesh’s economic growth will slow down to 6.1 percent in
2012 and 2013 due to the gloomy global economy, forecast the
International Monetary Fund yesterday. The country’s GDP grew
by 6.3 percent in the last ﬁscal year despite the global crisis and
the government’s target is 7.2 percent for the current ﬁscal year.
The growth of the export-dependent economy will slow down
as low growth in advanced economies is aﬀecting emerging and
developing economies through exports. Over 70 percent of the
country’s exports go to the USA and the European Union, most
hard-hit by the economic crisis. Last week, Asian Development
Bank also said Bangladesh’s economic growth may come down to
6 percent in the current ﬁscal year due to sluggish exports and a
decline in domestic demand. The IMF, however, said Bangladesh’s
inﬂation would ease down to 6.9 percent this year and to 6.4
percent next year from 10.6 percent in 2011. The prediction came
from the Washington-based lender in its latest World Economic
Outlook unveiled in Tokyo yesterday ahead of the IMF-World Bank
2012 Annual Meetings.
Blanchard presented a gloomier picture for the global economy
than predicted a few months ago, saying prospects have
deteriorated further and risks increased. Overall, the IMF’s forecast
for global growth was marked down to 3.3 percent this year and
3.6 percent for 2013. The economist urged countries to continue
with accommodating monetary policy which he said was a very
powerful force for growth on its own. Over 10,000 central bankers,
ministers of ﬁnance and development, private sector executives,
academicians, and journalists have gathered at the Japanese
capital to discuss global economic issues.
Source: The Daily Star, October 10, 2012
Slow exports to pull down GDP growth to 6pc: ADB
Bangladesh’s economic growth may come down to 6 percent in the
current ﬁscal year due to sluggish exports and a decline in domestic
demand, the Asian Development Bank has said. The lender
launched its Asian Development Outlook 2012 in Bangladesh and
throughout Asia Paciﬁc yesterday. GDP (gross domestic product)
rose by 6.3 percent and the government’s target is 7.2 percent for
the current ﬁscal year. However, the ADB said inﬂation will fall by
2 percentage points and stand at 8.5 percent on average in the
current ﬁscal year compared to that in the last ﬁscal year. “Export
growth is expected to remain low in the ﬁrst half of ﬁscal 2013,”
said ADB Country Director Teresa Kho at a press conference at
the organization’s oﬃce in Dhaka yesterday. Growth in domestic
demand is also likely to stay limited because of the central bank’s
continued credit tightening, Kho said.
Mohammad Zahid Hossain, principal economist of the ADB
in Bangladesh, made a presentation on the latest situation of
Bangladesh’s economy at the press conference. Hossain said a
ﬁnancial crisis in the European Union is aﬀecting Bangladesh’s
exports. Echoing the view of the ADB country director, he said
credit tightening by the central bank will slow domestic demand.
“The expected rise in remittances will not be strong enough to fully
oﬀset it.” Hossain said sectoral GDP growth in the services and
industries sectors will be slow in the current ﬁscal year but growth
in the agriculture sector will almost double compared to that in
the last ﬁscal year. About inﬂation, he said upward adjustments in
the fuel and electricity prices at home will lift non-food inﬂation.
But inﬂationary pressures will be contained as central bank’s credit
tightening measures take hold. He also said the international prices
of commodities, including that of fuel, are expected to be broadly
stable. Hossain said food prices are expected to fall in the ﬁrst half
with comfortable domestic supply, but will go up in the second half
as drought in a number of major agricultural suppliers cuts global
supplies. The ADB said remittance growth will be 12 percent in the
whole year as more workers leave for the Middle East countries.
The prevailing oil prices support the construction projects in those
4
MTBiz
countries that engage the bulk of unskilled Bangladeshi workers.
However, the ADB said several downside risks could upset the
projections. It said ﬁscal management could come under pressure
if the revenue target is not realized and planned foreign ﬁnancing
does not materialize. If political pressures quash the expected
increases in fuel and electricity prices, it may also strain ﬁscal
management, the ADB said. The lender also said the monetary
discipline could be undermined if the government increases bank
borrowing to ﬁnance subsidy spending. Finally unfavorable weather
or political unrest could aﬀect economic activities, it said. The ADB
country director said it is important to enhance macroeconomic
stability in the short-term and strengthen internal and external
balances. Kho also said ensuring adequate credit for the private
sector is a priority. Policy actions at the same time should focus on
keeping inﬂationary pressures in check, she added.
Source: The Daily Star, October 04, 2012
JICA bankrolls BDT 450cr project for SMEs
The government yesterday rolled out a project to lend BDT 450
crore to help the country’s cash-starved small and medium
enterprises. Under the scheme funded by Japan International
Cooperation Agency (JICA), SMEs will be able to borrow between
BDT 5 lakh and BDT 5 crore, or up to 90 percent of the investment
a business will make. The ﬁnancing horizons would be: longterm loans for six to eight years, with two years of grace period;
medium-term loans for two to ﬁve years, with one year of grace
period; and working capital for one year, renewable for up to 5
years. The disclosure came at a programme co-organised by
Bangladesh Bank and SME Foundation at the latter’s oﬃce in the
capital. ABM Khorshed Alam, managing director of the foundation,
said SMEs normally receive bank loans for short-terms. “But this
ﬁnancing will give them opportunity to obtain loans for medium to
long terms.” Sukamal Sinha Choudhury, general manager of SME
& Special Programmes Department of BB, said the bank would go
to district levels to create awareness of the scheme. The SME &
Special Programmes Department will serve as the implementing
agency for the project on behalf of the ﬁnance ministry. They will
make loans to ﬁnancial institutions, who, in turn, will lend to endborrowers. Oﬃcials said that there are no speciﬁc sectors being
targeted and SMEs in all sectors are eligible under the scheme.
Similarly, there are no conditions set on the geographical location
of the businesses. The items eligible for ﬁnancing under the
scheme are ﬁxed assets, including machinery and equipment
factory buildings and related civil works, technical know-how,
consulting services, training, and initial working capital, which
is associated with the investment loan. Purchase of land or land
use rights are not eligible for ﬁnancing under the scheme, said an
oﬃcial of SME Foundation.
Source: The Daily Star, October 03, 2012
WB approves BDT 5.6b for ICT development
The World Bank has approved USUSD 70 million (BDT 560 crore) loan
to catalyze the growth of Bangladesh’s IT industry for employment
generation and export diversiﬁcation as well as establishing basic
e-government foundation. “The WB assistance would be approved
in favour of a project titled Bangladesh Leveraging ICT for Growth,
Employment and Governance,” said ICT Minister Mostofa Faruk
Mohammad when a delegation of Khulna Division Journalists’
Forum-Dhaka led by its president Madhusudhan Mondal paying a
call on him at his oﬃce in Agargaon on Monday.
The delegation was also consisted of Forum’s Vice-Presidents Syed
Saﬁ and Harun Jamil, General Secretary Raﬁqul Islam Sabuj, Joint
Secretary Fasih Uddin Mahatab and Organising Secretary Morsalin
Nomani. During the meeting the minister informed that the loan
of the World Bank would be repaid in 40 years with 10 years grace
period.
Source: The Independent, October 02, 2012

6.
NATIONAL NEWS
Foreign direct investment: Reﬂecting the reality
The growth of foreign direct investment (FDI) in the last three
decades has been phenomenal. FDI can take the form of a foreign
ﬁrm buying a ﬁrm in a diﬀerent country or deciding to invest in a
diﬀerent country by building operations there. With FDI, a ﬁrm has
a signiﬁcant ownership in a foreign operation and the potential to
aﬀect managerial decisions of the operation.
While developed economies still account for the largest share of
FDI inﬂows, recent data show and indicate that stock and ﬂow
of FDI has not only jacked up, but moving towards developing
economies also - more speciﬁcally to the fast emerging economies,
globally. Apart from using FDI as investment channel plus a method
of reducing operation costs, many blue chips are looking at FDI as
one of the ways to internationalize. Side by side, the reality is that
the movement from developed to developed zone still remains
higher, compared to that between developed to developing or
developing to developing zone. Still, the stock and ﬂow of FDI has
gone up and moving towards developing zone and more so in the
emerging economies.
The positive side of FDI must not be missed as otherwise any
analysis on this score is bound to be biased. The sole important
thing is whether the economy loses control or allows it to act in a
way which is detrimental to economy’s well being and interest.
One of the advantages of FDI is that it helps in the economic
development of the particular country where the investment is
being made. This is especially applicable for developing economies.
During the 1990’s FDI was one of the major external sources of
ﬁnancing for most countries that were growing economically. It is a
fact that foreign direct investment helped several countries when
they faced economic hardship. Economies like China, South Korea,
Singapore and Philippines availed maximum beneﬁts of FDI that
helped them to ﬂy high.
Global FDI ﬂows exceeded the pre-crisis average in 2011, reaching
USD1.5 trillion despite turmoil in the global economy. However,
it still remains some 23 percent below its 2007 peak. Leading
indicators retreated in the ﬁrst ﬁve months of 2012. In fact, FDI
inﬂows increased across all major economic groupings in 2011 ﬂows to developed countries increased by 21 percent, to USD748
billion. In developing countries FDI increased by 11 percent,
reaching a record USD684 billion, while FDI in the transition
economies increased by 25 percent to USD92 billion. Developing
and transition economies, respectively, accounted for 45 percent
and 6 percent of global FDI.
Source: The Financial Express, October 04, 2012
Tax collection from capital mkt declines
Tax collection from the country’s capital market showed a sharply
declining trend in the current ﬁscal.
Only an amount of BDT 310 million in taxes could be realized from
transactions in stock market in the ﬁrst quarter (July-September)
of the ﬁscal year (FY), 2012-13, against BDT 430 million during
the corresponding period of the last ﬁscal. The National Board of
Revenue (NBR) collected BDT 190 million in July, BDT 60 million in
August and BDT 70 million in September, this year.
The NBR oﬃcials fear that given the trend during the ﬁrst quarter
of the current ﬁscal, aggregate tax collection from share market
transactions may drop to a marked extent this year. DSE (Dhaka
Stock Exchange) general index shed 400 points in the JulySeptember period compared to that of the same period in the last
ﬁscal. In FY 2010-11, stock market index stood at 4846 point that
dropped to 4446 points in FY 2011-12.
Tax collection also declined to BDT 1.72 billion from BDT 3.22
billion in the last ﬁscal compared to that of the corresponding
period following sharp price decline in share market last ﬁscal.
NBR deducts tax at source from each of the share transaction by
stock exchange members at the rate of 0.05 percent. The board
has found the tax collection trend is declining sharply with the
downward trend of transactions in the capital market.
Rate of tax on transaction of share/debenture by stock exchange
members has been increased to 0.05 percent from 0.025 percent
in ﬁscal 2010-11. At ﬁrst the government had proposed to increase
threefold the tax rate on members of share market, to 0.1 percent
from 0.025 percent, but later it cut it down to 0.05 percent
following pleadings of the bourses. There are 238 brokerage
houses under Dhaka Stock Exchange (DSE) and 148 in Chittagong
Stock Exchange (CSE).
Experts are not in favour of increasing the tax rate on share
transactions as they fear brokerage houses might increase their
commission on share transactions to pay the additional tax burden,
aﬀecting adversely the small investors. Presently, a brokerage
house deducts commission at a maximum of 1.0 percent for
investors in the stock market. The tax at source on commission of
stock exchange members was raised to 0.025 percent from 0.015
percent in ﬁscal 2009-2010.
Source: The Daily Star, October 07, 2012
Non-food inﬂation up by 1.0pc in Sept
The country’s non-food inﬂation edged up by nearly 1.0 percent
to 10.18% in September last, which analysts suggest, is mainly
attributable to rise in prices of utilities. Bangladesh Bureau of
Statistics (BBS), the country’s national statistical organization,
Sunday released the data of consumer price index (CPI) and the
state of the situation about inﬂation for the month of September.
The rate of inﬂation at the national level, measured on the basis
of CPI, remained almost the same at 4.96 percent last month, with
2005-06 as the base year. However, the rate of food inﬂation at the
national level decreased to 1.75 percent on a point-to-point basis
in September. The non-food inﬂation sharply increased in urban
areas to 10.36 percent in September against 8.10 percent during
the same period in 2011.
However, the rate of inﬂation at the national level measured on
the basis of the old base year-1995-96-dropped to 7.39 percent
against 11.97 percent in the same period in 2011. The non-food
inﬂation also increased under the old baseline by 1.18% to 9.95%
in last month. The BBS has been preparing CPI on two base years
since July last to help avoid confusion. It will prepare CPI only on
the basis of the new base year -2005-2006- from January next.
Source: The Financial Express, October 08, 2012
Inﬂation drops on stable food prices
Inﬂation eased for the third month in September thanks to stable
prices of food, but spiralling electricity prices, transport cost
and house rents pushed up non-food inﬂation. Overall inﬂation
slipped to 7.39 percent in September, compared with 7.93 percent
in August, according to data released by Bangladesh Bureau of
Statistics yesterday. Food inﬂation dropped to 6.16 percent in
September from 7.10 percent a month ago. Non-food inﬂation
soared to 9.95 percent last month from 9.59 percent in August,
said the statistical agency that calculated inﬂation taking 1995-96
as the base year.
In a press brieﬁng at its oﬃce in Dhaka, BBS Director General
Golam Mostafa Kamal linked higher non-food inﬂation to a power
price hike. The government increased power tariﬀ 15 percent to
BDT 5.75 a unit on September 1 to cut subsidy on power. As per
the BBS estimate based on 1995-96 base year, inﬂation dropped
in both rural and urban areas because of a decline in food price
index. Stable prices of food, mainly rice, contributed to the falling
inﬂation, said Zaid Bakht, research director of Bangladesh Institute
of Development Studies. In its calculation based on the revised
base year, 2005-06, inﬂation declined in September from a month
ago. But non-food inﬂation accelerated 10.18 percent last month
from 9.29 percent in August.
Source: The Daily Star, October 08, 2012
Sept exports rise 32pc, but quarter data dismal
Exports rose about 32 percent in September from the same month
a year ago, but overall growth in the ﬁrst quarter continued to
remain sluggish amid weak demand in major markets in Europe
and USA.
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7.
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Companies shipped USD1.9 billion worth of goods overseas in
September, up from USD1.44 billion in the same month a year
ago, according to the Export Promotion Bureau. But total export
receipts grew only 2 percent to USD6.29 billion in July-September
from the same quarter a year ago, the data shows. Shipments of
woven garments, which account for 39 percent of the total exports
receipts in the ﬁrst quarter of the current ﬁscal year, grew about
10 percent to USD2.45 billion in July-September, compared to the
previous year.
Export earnings from other major sectors -- knitwear, frozen ﬁsh
and shrimp and leather -- fell in July-September.
Knitwear, which contributes 40 percent to the national export
basket, slipped 1.54 percent to USD2.53 billion in July-September
from what it was a year ago. Export receipts from frozen foods,
the third biggest contributor in the export basket after clothing
and jute, slumped 74 percent to USD129 million in July-September
driven by shrimps, which are shipped mainly to Europe and the
USA.
Source: The Daily Star, October 10, 2012
US to provide USD200m for sustainable development
The US government will provide USUSD200 million assistance
to Bangladesh for reducing poverty and achieving sustainable
development for 2012 ﬁscal year. The development assistance
would be disbursed through United States Agency for International
Development (USAID) for carrying out development activities
in ﬁve major areas, including health and education, democratic
institutions, food security, climate change and humanitarian
assistance.
The assistance, which is an increase of approximately USUSD 17
million from the previous ﬁscal year, would help achieving longterm development objectives as reﬂected in the Bangladesh
government’s Sixth Five Year Plan.
While announcing the US commitment in development assistance,
US Ambassador to Bangladesh Dan Mozena said, “Our partnership
in Bangladesh is growing. Our support this year is a nearly ten
percent increase over last year. Of the total fund, USUSD 6 million
would be used to build capacity for democratic representation,
strengthen its institutions of good governance, promote human
rights and support a culture of tolerance.
Besides, USUSD 74 million would be invested in health programmes
to promote voluntary family planning, improve maternal and child
health, support better water and sanitation practices and prevent
and treat tuberculosis and HIV/AIDS, among other diseases.
In addition, USAID will provide approximately USUSD 4 million for
basic education.
In support of food security, the USAID will provide USUSD 52
million to increase agricultural production, build links to markets,
raise incomes, and stimulate economic growth. Under its climate
change programme, the USAID will provide more than USUSD
19 million to promote energy eﬃciency, improve the resilience
of communities to the negative impacts of climate changes and
promote conservation of biodiversity.
On the other hand, USUSD 45 million will be given in humanitarian
assistance to improve availability of food, basic health and nutrition
services to highly vulnerable population. USAID Bangladesh Mission
Director Richard Greene, acting Economic Relations Division (ERD)
secretary Shaﬁqul Azam and other oﬃcials were also present at
the conference in the city on Thursday.
Source: The New Nation, October 12, 2012
Local investment proposals drop by 19pc in Q1
Local investors are reluctant to undertake new ventures causing
a plunge in investment proposals by nearly 19 percent in the
ﬁrst quarter of the current ﬁscal compared to the previous three
months (April-June). The Board of Investment (BoI) received
investment proposals from local entrepreneurs worth BDT 116.24
6
MTBiz
billion against 372 industries in July-September period, according
to the data of the BoI released Monday. In April-June period, BoI
received investment proposals worth BDT 143.10 billion. Local
entrepreneurs say inadequate energy and infrastructure, liquidity
shortage in the market due to Hall-Mark scam are the two major
reasons that discourage them to invest. Metropolitan Chamber of
Commerce and Industry (MCCI) president Maj Gen Amjad Khan
Chowdhury (Retd) said power shortage and liquidity crisis in the
market are the major causes of sluggish trend of investment
proposals in BoI. BoI received 420 investment proposals worth BDT
148.76 billion in the ﬁrst quarter of the current ﬁscal, dropped by
three percent than that of previous three months. In the previous
three months (April-June) BoI received investment proposals worth
BDT 153.53 billion. Joint venture and foreign investment proposals
increased to 211.89 percent in the July-September period. A total
of 49 foreign and joint venture companies were registered with
their investment proposals worth BDT 10.43 billion in the BoI. BoI
received the highest investment proposals from the service sector
entrepreneurs that contributed 38.48 percent of the investment
proposals followed by textile sector 34 percent, chemical sector
9.0 percent, agriculture industry 8.0 percent and other sectors 11
percent. The investment proposals could generate employment
for a total of 82,314 people.
Source: The Financial Express, October 23, 2012
WB lowers BD’s economic growth forecast to 6.0pc
The World Bank (WB) lowered Bangladesh’s economic growth
forecast to around 6.0 percent from the government’s projection
at 7.2 percent with the sharp fall in the growth rate attributed
mainly to the domestic investment constraints and the weak
external demand. In its report released on Sunday, the global
lender said there were concerns that Bangladesh’s economic
growth could slow mainly because of the weak external demand
and the domestic investment constraints. But the Bretton Woods
institution termed the growth healthy in the context of the
ongoing unfavorable global economic conditions. WB Country
Director Ellen Goldstein said: “This (real GDP growth) might be 6.2
percent, 6.1 percent or 5.9 percent in the ﬁscal ‘13.” The country’s
Gross Domestic Product (GDP) grew 6.3 percent in 2012 from a
year earlier.
But the weak exports to the largest export destination eurozone
and the lower domestic investment growth might slow down the
pace to around 6.0 percent in the ﬁscal ‘13. Dr Zahid Hussain,
senior economist at the WB’s Dhaka oﬃce, said the government’s
projection of economic growth at 7.2 percent in the current annual
budget would not be achieved due to the eurozone crisis and the
lower investments in the country.
The report said the opening of letters of credit (LC) for import
of capital machinery in the June-August period last declined 7.9
percent compared to the corresponding period in 2011 indicating
weak investments in manufacturing. According to the report,
Bangladesh’s economy is healthy compared to other south Asian
nations and it is 35th among the 150 countries in terms of growth
as per the IMF ranking. Dr Zahid said Pakistan is likely to grow
3.3 percent, Nepal 3.6 percent, Malaysia 4.7 percent, Vietnam
5.9 percent, India 6.0 percent, Sri Lanka 6.7 percent and China
8.2 percent. Earlier, the Manila-based Asian Development Bank
forecast the growth rate for Bangladesh at 6.0 percent and the
other Bretton Woods institution IMF put it at 6.1 percent.
Source: The Financial Express, October 22, 2012
Only 12pc of ADP implemented in Q1
The annual development programme implementation trend
remains sluggish as usual in the ﬁrst quarter of the current
ﬁscal year as the government agencies and ministries used only
12 percent of the ADP allocations in July-September. In JulySeptember, the government agencies could spend only BDT 6,381
crore or 12 percent of the allocation, according to data released
on Monday by IMED. In the same period of last ﬁscal year, the
ADP utilization rate was 11 percent or BDT 4,835 crore. Of the

8.
NATIONAL NEWS
total expenditure, the share of the government funding was BDT
4,307 crore or 13 percent and the share of foreign loans and
grants was BDT 2,074 crore or 10 percent. During the period, the
implementation rate of the government funded projects declined
by two percent from 15 percent while the implementation rate
of foreign-funded projects increased by 6 percent from 4 percent
compared to July-September of 2011-12, IMED data showed.
Among the 54 ADP implementing agencies, legislative and
parliamentary aﬀairs division and public service commission
secretariat failed to spend even a single BDT in the ﬁrst three
months of the ﬁscal year.
The implementation status of another ﬁve ministries and divisions
remained below one percent. The ministries and divisions are
labor and employment ministry, civil aviation and tourism ministry,
bridges division, internal resources division and roads division.
Oﬃcials said that development works in the ﬁeld level would be
higher than what the expenditure shows as most of the agencies
carry on the physical developments of the projects without
resource disbursement.
Usually resource disbursement takes time, they said, adding that
IMED calculates implementation status based on expenditure, not
physical development.
In July-September, the government released BDT 8,316 crore or
25 percent of the total allocation, the data showed. The size of
current ﬁscal year’s ADP is BDT 55,000 crore. Of the amount, BDT
33,500, or 61 percent, will be allocated from the government
fund and BDT 21,500, or 39 percent, will be available from foreign
assistance in the form of loans and grants.
Among the ministries and divisions that spent more than 20
percent of their allocations, planning division topped the list
with 30 percent, followed by commerce ministry and religious
aﬀairs ministry with 24 percent, expatriates’ welfare and overseas
employment ministry with 23 percent, rural development and cooperatives division and power division with 22 percent.
Source: The New Age, October 23, 2012
NBR earnings go up 15pc
Revenue receipts grew 15.49 percent in the July-September period
of the current ﬁscal year, breaking a sluggish trend in the ﬁrst two
months of the year.
The collection of the National Board of Revenue (NBR) rose to BDT
20,894 crore in the ﬁrst quarter of 2012-13, up from BDT 18,091
crore in the same period last year, fuelled by a rise in earnings
from customs duty, value-added tax and income tax. The tax
administrator logged a 10 percent growth in the July-August period
of the current ﬁscal year, according to NBR data. Submission of tax
returns by individual taxpayers ahead of the deadline accelerated
income tax receipts. Income tax collection soared by 24.50 percent
to BDT 5,593.49 crore this year, up from BDT 4,492.59 crore last
year. A rise in imports in September also buoyed the customs duty
collection. Receipts from customs duty, which was down 4.46
percent in the July-August period, grew 10 percent to BDT 3,201.24
crore in July-September. VAT and supplementary duty collection at
domestic level also went up.
Increased revenue from cigarettes manufacturers is one of the
main reasons behind the rise in VAT and supplementary duty,
said Mohammad Ahsanul Haque, ﬁrst secretary for VAT at the tax
administrator. VAT receipts at domestic level rose 20 percent to
BDT 5,007.54 crore in three months to September of the ongoing
ﬁscal year, from BDT 4,175.02 crore last year.
Source: The Daily Star, October 26, 2012
FDI inﬂow to Bangladesh records USD430m
Bangladesh received ‘relatively high’ foreign direct investment
(FDI) in the ﬁrst half of 2012 when the global investment inﬂows
declined by 8.0 percent, a recent Unctad report said, reports BSS.
The “Global Investment Trend Monitor” of the United Nations’
Conference on Trade and Development (Unctad), released on
October 23, shows about USD 430 million FDI inﬂow to Bangladesh
in the ﬁrst six month of 2012, which was only 2.04 percent lower
than the investment in 2011.
The rate of FDI fall in Bangladesh was much lower than the regional
falling trend. South Asia during this period suﬀered 40.1 percent
decline when the investment inﬂow fell by 42.8 percent to India.
In the ﬁrst half of 2012, global FDI inﬂows reached USD 668 billion,
a decline of USD 61 billion or 8 percent compared with the same
period of 2011, as the economic recovery suﬀered new setbacks
in the second quarter of 2012. The USD61 billion fall was mainly
caused by a decline of USD 37 billion in inﬂows to the United States
and a USD 23 billion fall in inﬂows to BRIC countries -Brazil, Russian
Federation, India and China.
The declines were caused by steep falls in both greenﬁeld
investment projects (-40 percent) and cross-border M&A (merger
and accusation) transactions (-60 percent), which are also visible in
the reduced importance of the equity component of FDI inﬂows.
Developing countries for the ﬁrst time absorbed half of global FDI
inﬂows due to the steep fall in ﬂows to the United States and a
moderate decline in ﬂows to the EU. Despite a slight decline in
FDI inﬂows, China became the largest recipient country in the ﬁrst
half of 2012, followed by the United States Compared to the fullyear forecast of FDI inﬂows published in July, Unctad now projects
that FDI ﬂows will, at best, level- oﬀ in 2012 at slightly below USD
1.6 trillion. The slow and bumpy recovery of the global economy,
weak global demand and elevated risks related to regulatory
policy changes continue to reinforce the wait-and-see attitude of
many transnational companies (TNCs) toward investment abroad.
Unctad’s longer term projections still show a moderate rise.
However, the risk of further macroeconomic shocks in 2013 can
impact FDI inﬂows negatively.
Meanwhile, drops in foreign direct investment (FDI) entering the
United States and the European Union (EU) opened the way for
developing countries – for the ﬁrst time – to absorb half of global
FDI ﬂows, the United Nations trade and development agency said
in a report released. But global FDI nevertheless declined by eight
percent in the ﬁrst half of 2012 as economic recovery suﬀered new
setbacks in the second quarter of the year, the UN Conference
on Trade and Development (UNCTAD), stated in its tenth Global
Investment Trend Monitor. In the developing world, FDI inﬂows
decreased by ﬁve percent.
The report ﬁnds that global FDI fell USD 61 billion, with the decline
mainly caused by a drop of USD 37 billion in inﬂows to the US and
a fall of USD 23 billion in inﬂows to BRIC countries – Brazil, Russian
Federation, India and China. China nevertheless emerged as the
world’s largest recipient of FDI in the ﬁrst half of 2012, followed by
the United States, the report notes.
It adds that FDI ﬂows to the US might be stronger in the second
half of 2012 because the value of cross-border mergers and
acquisitions in the third quarter of the year was “double those
of the ﬁrst half of the year,” and some further acquisitions are
“already taking place or announced in the fourth quarter.”
One example cited by the report is the acquisition by the Japanese
telecommunication company SoftBank of US ﬁrm Sprint Nextel for
more than USD 20 billion. This will mark the largest investment
ever by a Japanese company, the report says.
The position held by developing countries was made possible by
the “steep fall” in FDI ﬂows to the US and a “moderate decline” in
ﬂows to the EU, the report notes. In developed countries, the rise
in ﬂows to Europe and developed countries was not enough to
compensate for the decline in ﬂows to North America, the report
says. Compared to the full-year forecast of FDI inﬂows published in
July, UNCTAD says it now projects that FDI ﬂows will, at best, leveloﬀ in 2012 at slightly below USD1.6 trillion.
Source: The News Today, October 30, 2012.
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9.
INTERNATIONAL NEWS
China, India consumer spending to triple by 2020: study
Consumer spending in emerging market powerhouses China and
India is expected to triple by 2020 to a combined USD10 trillion a
year, potentially helping to boost economic growth and corporate
proﬁts in the developed world, researchers said on Tuesday. The
study by Boston Consulting Group (BCG) is based on a survey of
24,000 consumers as well as interviews with business leaders.
The business strategy consultancy predicts consumers in China
and India will spend a combined total of USD64 trillion on goods
and services in the decade leading up to 2020. Annual spending
on consumer goods will be three times the level spent in 2010,
according to “The USD10 Trillion Prize: Captivating the Newly
Aﬄuent in China and India”. “We are at a turning point in history
where relative wealth will shift from the West to China and India,
but absolute wealth, including in the West, should increase,” said
Michael J. Silverstein, a senior partner at BCG and the book’s coauthor. Some of the enthusiasm for India, China and other emerging
markets has dimmed in recent months due to slowing economic
growth, weak progress with structural reforms and political risks.
Emerging equities have also not performed as well in recent
years as their developed peers. But the book’s authors played
down these worries, saying India and China were experiencing
the inevitable volatility in emerging economies. The middle class
in the two countries is expected to reach 1 billion by 2020, BCG
said, noting that in India, the proportion of middle-class people is
expected to grow to 45 percent in 2020 from 28 percent in 2010.
BCG said Western companies need to win over the growing middle
class of the two countries via long-term strategies adapted to the
future spending habits of these new consumers. It named Kraft,
Yum! Brands, PepsiCo, Gucci, LVMH, BMW, and Pernod Ricard
as companies that have deployed successful strategies in these
countries.
Source: The Daily Star, October 03, 2012
WB, IDB sign MoU to encourage expansion of Islamic ﬁnance
globally
The World Bank (WB) and Islamic Development Bank (IDB) Sunday
signed a Memorandum of Understanding (MoU) to set out a
framework for collaboration between the two parties and lend
support to global, regional and country eﬀorts in the development
of Islamic Finance, reports UNB.
The MoU adopts the following principals - knowledge sharing to
identify and disseminate sound practices in the Islamic ﬁnancial
services industry, cross fertilization of ideas that would foster
the development of Islamic ﬁnance that is critical for growth,
eﬃciency and ﬁnancial inclusion, encourage research and promote
awareness of appropriate risk management framework for Islamic
ﬁnancial institutions in particular and the Islamic ﬁnance industry
in general; and capacity building in the Islamic ﬁnancial services
industry with a view to fostering ﬁnancial stability and promoting
increased access to Islamic ﬁnancial services in markets around
the world.
World Bank Managing Director Dr Mahmoud Mohieldin stressed
the importance of the memorandum for increased capacitybuilding and knowledge-sharing between the two organizations.
Source: The Financial Express, October 15, 2012
IMF to share USD1.1b gold proﬁts with Bangladesh, others
The International Monetary Fund (IMF) is going to distribute
over one billion dollar, it proﬁted from gold sales, to low-income
countries including Bangladesh to help them withstand the global
recession.
years to 2014, according to a message received in Dhaka from IMF
on Saturday, reports UNB.
The decision authorizing the distribution was taken by the Executive
Board in February 2012, to become eﬀective only after IMF
members have provided satisfactory assurances that new amounts
equivalent to at least 90 percent of the amount distributed -- i.e.
SDR 630 million -- would be transferred or otherwise provided to
the IMF’s concessional lending vehicle, the Poverty Reduction and
Growth Trust (PRGT).
The 90 percent threshold has been reached with assurances
received from the member countries, meaning the distribution
can now take place. The countries include Bangladesh, India, Sri
Lanka, Algeria, Pakistan and Guinea.
The IMF will continue to seek contributions from remaining
members in order to maximize concessional lending capacity. In
addition, as agreed on September 28, the Fund is starting a process
for seeking assurances on a separate distribution of the remaining
gold sales windfall proﬁts of USUSD2.7 billion.
“This is a wonderful achievement that demonstrates our members’
determination to ensure the IMF has the wherewithal to support
its low-income members through this crisis,” IMF managing
director Christine Lagarde stated.
“For many countries this process has involved complex legal or
legislative steps, and it is a tribute to our membership that we
have arrived at the required level in just a few months.”
Because gold sales proﬁts are part of the IMF’s general resources
available for the beneﬁt of the entire membership, they cannot be
placed directly in the PRGT, which is available only to low-income
member countries.
Accordingly, using these resources for PRGT ﬁnancing required
a distribution of the resources to all IMF member countries
in proportion to their quota shares, on the expectation that
members would direct the Fund to transfer these resources (or
would provide broadly equivalent amounts) to the PRGT as subsidy
contributions.
The resources raised through the operation will count towards
the 2009 package’s target of raising an additional SDR 1.5 billion
(USUSD2.3 billion) in PRGT subsidies. The balance is being raised
from other sources, including additional bilateral contributions
which the IMF continues to seek from member countries.
The IMF sold 403.3 metric tons of gold in 2009-10 as part of a plan to
ensure the long-term ﬁnancing of the IMF’s day-to-day operations
through the creation of an endowment using anticipated gold
sales proﬁts of some SDR 4.4 billion (USUSD6.8 billion).
High world gold prices during the sales period, over and above
the USUSD850 an ounce envisaged when the sales were originally
planned, generated “windfall” proﬁts of some SDR 2.45 billion
(about USUSD3.8 billion).
The ﬁrst SDR 700 million of those windfall proﬁts will now be
distributed to the membership in proportion to their IMF quota
shares.
Meanwhile, on September 28, 2012, the IMF Executive Board
approved a second distribution of the remaining SDR 1.75 billion
(USUSD2.7 billion) in windfall gold sales proﬁts in a similar strategy
to raise resources to make the PRGT concessional lending capacity
sustainable.
That second distribution is also conditional on receiving satisfactory
assurances from members that new amounts equivalent to at least
90 percent of the amount distributed -- i.e. SDR 1.575 billion -- will
be transferred or otherwise provided to the PRGT.
It will distribute SDR (special drawing rights) 700 million (about
USUSD1.1 billion) in reserves to its members in order to boost its
concessional lending capacity for low-income countries during the
global crisis.
The distribution is a key element of a 2009 plan to boost
concessional lending capacity to USUSD17 billion over the ﬁve
8
The global economy, Slower and slower
The International Monetary Fund’s new World Economic Outlook is
out this week, and the latest global growth projections are dismal,
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Source: The New Nation, October 14, 2012

10.
INTERNATIONAL NEWS
if expected. A few things stand out. One is the steady downshift
in global growth since 2010 (which, to be fair, was one of the best
annual global growth performances ever). The IMF forecasts an
acceleration in growth in 2013, but I’m not sure how many of us
would bet on that. Another is the extremely ugly outlook for Spain
and Italy—the IMF now forecasts another year of serious recession
for Spain in 2013—which suggests that political and economic
tensions within the euro zone will remain high. A third is the big
downward revision to growth in emerging market economies and
India especially.
Not pictured in this chart is the forecast for a steady deceleration
in world trade, including a large downward revision to forecasts
for emerging-market imports and exports. The overarching view
is a world in which troubles are propagated around the world,
exacerbating local economic challenges. Europe’s sinking economy
is socking emerging markets, frustrating eﬀorts at rebalancing and
reform.
If the multipliers underlying the growth forecasts were about
0.5, as this informal evidence suggests, our results indicate that
multipliers have actually been in the 0.9 to 1.7 range since the Great
Recession. This ﬁnding is consistent with research suggesting that
in today’s environment of substantial economic slack, monetary
policy constrained by the zero lower bound, and synchronized
ﬁscal adjustment across numerous economies, multipliers may be
well above 1.
This will probably fuel an intellectual debate concerning the
relative importance of ﬁscal and monetary policy and the extent
to which central banks can oﬀset ﬁscal cuts. My inclination is to
argue that Mr Blanchard is right to pinpoint the zero bound as a
constraint on central banks that is likely to raise ﬁscal multipliers,
but this constraint is more institutional than technical. I suspect
the debate will unfold in a fairly unsatisfying manner, with some
suggesting that the economies that have done most poorly amid
austerity are those where nominal output growth has fallen most
below trend, indicating that central banks have failed, while the
other side will question how a central bank can hope to maintain
steady nominal output growth when austerity is crushing demand.
I’ll chip in my own contribution to this unsatisfying exchange.
American ﬁscal consolidation hasn’t been that diﬀerent from
shifts in, for instance, France, but American nominal output has
held steady while France’s has sunk, along with real output. And
it seems clear that the zero lower bound has not been the main
constrain on the European Central Bank over the past two years.
The more important point is that one need not resolve this
intellectual debate to improve conditions across the global
economy. The pace of ﬁscal consolidation in many economies simply
isn’t justiﬁed; a combination of less short-term ﬁscal consolidation
and more reform would make a great deal of sense. Similarly,
advanced-economy central banks are vastly behind the curve,
worrying far too much about inﬂation given current economic
dynamics. A bigger commitment to asset purchases would help,
in Europe especially, but the best thing that could happen to rich
economies right now might be an acknowledgement across central
banks that a few years of inﬂation between 3% and 5% might be
beneﬁcial on net and would therefore be tolerated.
Above all, governments and central banks should try to avoid
dragging the world economy into recession. At this point it should
be clear that excessively miserly behaviour by governments
and central banks can have nasty feedback eﬀects, leading to a
slow constriction of growth that worsens political, social, and
structural economic problems and makes a future disaster more
probable. Sovereign debt loads are disconcertingly large in many
countries and will need to be addressed. It is diﬃcult to avoid the
conclusion, however, that the current approach is both bad for
growth and counterproductive to the goal of reducing sovereign
indebtedness.
Source: The Economist, October 9, 2012.
OECD says higher energy prices boosting inﬂation
Higher energy prices forced annual inﬂation in advanced
economies to rise to 2.0 percent in August from 1.9 percent in
July, the OECD said. “Energy price inﬂation accelerated sharply
to 3.5 percent in August, up from 0.7 percent in July, while food
price inﬂation slowed to 2.1 percent in August, compared with 2.3
percent in July,” said the Organization for Economic Cooperation
and Development in a statement. Excluding food and energy, the
annual inﬂation rate slowed to 1.6 percent in August compared
with 1.8 percent in July, according to the data for the 34-member
OECD. By individual countries, inﬂation gained pace in Germany,
reaching 2.1 percent in August from 1.7 percent in July, while in
the United States it advanced to 1.7 percent from 1.4 percent.
In Japan, however, consumer prices dipped 0.4 percent in August.
Outside the OECD area, annual inﬂation accelerated in India to 10.3
percent in August from 9.8 percent in July. Inﬂation also rose in
Russia to 5.9 percent from 5.6 percent and in China to 2.0 percent
from 1.8 percent, the organisation said. Annual inﬂation was
stable in Brazil from July to August at 5.2 percent and Indonesia
at 4.6 percent.
Source: AFP, October 2, 2012
No recovery until 2018, IMF warns
The International Monetary Fund’s chief economist has warned
that the global economy will take a decade to recover from the
ﬁnancial crisis as the latest snapshot of the UK economy suggested
that growth in the third quarter will be at best anaemic.
Olivier Blanchard said he feared the eurozone crisis, debt problems
in Japan and the US, and a slowdown in China meant that the
world economy would not be in good shape until at least 2018.
“It’s not yet a lost decade,” he said. “But it will surely take at least
a decade from the beginning of the crisis for the world economy to
get back to decent shape.
Blanchard made his comments on a Hungarian website Por olio.
hu ahead of the IMF meeting next week in Tokyo. Germany is
expected to defend its handling of Europe’s debt problems at the
meeting, but Blanchard said there was more that Europe’s largest
economy could do to support Spain and other struggling eurozone
nations. In particular, he urged Berlin to accept a rise in inﬂation
and wages that would make it less competitive with its trading
partners.
He said there was no risk of hyperinﬂation in Europe. Higher
inﬂation in Germany, though, would be beneﬁcial: a somewhat
higher inﬂation rate in Germany should simply be seen as a
necessary and desirable relative price adjustment, he said.
Blanchard’s comments came as ﬁgures from Markit showed that
the UK’s important services sector grew in August but slipped
back by September as the Olympics factor waned. According to
industry ﬁgures from Markit the services activity index dropped
from 53.7 to 52.2 and employment fell, adding to gloomy surveys
of the construction and manufacturing sectors earlier in the week.
Markit, which compiles a monthly index based on ﬁgures from the
Chartered Institute of Purchasing and Supply, said it was now clear
that the bounce back from the slump in the ﬁrst half of the year
was weaker than expected and could result in the UK economy
growing by just 0.1% in the third quarter.
Hopes that the Queen’s diamond jubilee and the £9bn spent on
the Olympics would lift sales over the longer term have largely
been dashed as growth slows and the outlook, though robust with
a growing order book, remains subdued. The Bank of England’s
monetary policy committee, which began a two-day meeting on
Wednesday, is on Thursday expected to keep interest rates at
0.5% and maintain the stock of bonds in its quantitative easing
programme at £375bn. Most economists believe it is possible the
lacklustre ﬁgures will persuade the MPC to add a further £50bn at
its November meeting when the ﬁrst estimate of the third quarter
ﬁgures is available.
Source: The Guardian, October 3, 2012
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9

11.
INTERNATIONAL NEWS
East Asia Growth Seen at 11-Year Low on China
Slowdown: Economy
The World Bank said policy makers in Asia’s emerging economies
have room to provide more ﬁscal stimulus as China’s slowdown
drags the region’s growth to an estimated 11-year low in 2012.
Growth in developing East Asia, which excludes Japan and India,
will probably ease to 7.2 percent from 8.3 percent in 2011, the
Washington-based lender said in a report today. That is the slowest
pace since 2001, according to World Bank data, and lower than a
forecast in May of 7.6 percent.
The International Monetary Fund is set to reduce its global forecast
for this year tomorrow at an annual meeting in Tokyo where
oﬃcials will tackle a slowdown triggered by Europe’s sovereigndebt crisis. Central banks are stepping up eﬀorts to protect the
worldwide recovery, with the U.S. expanding monetary easing, the
Bank of Japan boosting its asset purchases and the Bank of Korea
forecast to cut interest rates this week.
Asian stocks and commodities fell before European ﬁnance
ministers meet today, with the MSCI Asia Paciﬁc excluding Japan
Index losing 0.9 percent at 1:33 p.m. in Hong Kong. Australia’s
dollar slid to the lowest level in almost three months before a
report this week that may show unemployment increased, while
the yuan touched its strongest level since 1993 on speculation
policy makers will take more steps to spur the Chinese economy.
Adding Stimulus
India’s central bank held interest rates last month while
unexpectedly reducing the amount of deposits lenders must set
aside as reserves, and South Korea announced 5.9 trillion won
(USD5.3 billion) of spending and tax relief as oﬃcials acted to shield
their economies. Manufacturing from Europe to China contracted in
September, and the Asian Development Bank last week lowered its
inﬂation and expansion forecasts for the region excluding Japan for
this year and next. To shield growth, Philippine President Benigno
Aquino is increasing spending to a record and seeking more than
USD16 billion of investments in roads and airports, and Malaysian
Prime Minister Najib Razak is also boosting disbursements. The
Philippine government is conﬁdent it will be able to sustain
expansion, “focusing on investment in infrastructure, making sure
that governance continues to improve”, Finance Secretary Cesar
Purisima, said in a Bloomberg Television interview today. Growth
in developing East Asia was 7.5 percent in 2009 during the global
ﬁnancial crisis, according to World Bank data.
‘Signiﬁcant Slowdown’
China will use “preemptive policy” to bolster growth in Asia’s
biggest economy, Premier Wen Jiabao said last month, after
expansion slid to a three-year low in the second quarter. “China’s
slowdown this year has been signiﬁcant,” the World Bank said.
“Economic momentum is expected to be weak during the coming
months with limited policy easing, a property market correction,
and faltering external demand.” Asia’s exports have slipped as
slower global growth crimps demand for the region’s goods.
China’s shipments abroad rose less than estimated in August,
while Thailand, Singapore and Malaysia have reported declines.
How soon the global economy can right itself will be debated at
this week’s meeting of the IMF, which monitors worldwide trade
and ﬁnance imbalances. Delegates will be greeted by the news
that the lender anticipates even worse growth this year than the
3.5 percent it projected in July.
Social Welfare
China may announce additional tax cuts and spending on
infrastructure, public housing and social welfare to boost domestic
demand and counter external weakness, economists at HSBC
Holdings Plc led by Qu Hongbin said in a report last week. “The
recent disappointing data, in particular the collapse in export
growth and rising pressure on the labor market, has acted as a
wake-up call to Beijing policymakers, prompting the acceleration
10
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of easing policy,” they wrote. In Europe’s day ahead, a government
report may show Switzerland’s unemployment rate rose to an 18month high of 3 percent from 2.9 percent in August, according to a
survey of economists. German industrial production probably fell
in August from July, when it unexpectedly rose, according to the
median forecast in a Bloomberg survey.
China’s service industries expanded at a faster pace in September
as output increased at the quickest pace since May, with the
purchasing managers’ index climbing to 54.3 from 52 in August,
HSBC Holdings Plc and Markit Economics said today. New home
prices rose for a fourth month in September, according to SouFun
Holdings Ltd.
Inﬂation Eased
Crude oil has fallen about 9 percent this year, helping ease
inﬂationary pressure, the World Bank said. Price gains in the
Philippines unexpectedly slowed in September, while in Indonesia
they eased for the ﬁrst time in four months. Global food-price
increases pose less of a risk now after bountiful rice harvests in
Cambodia, Vietnam and the Philippines, the World Bank said.
Still, renewed monetary stimulus in Europe, Japan and the U.S.
could trigger capital inﬂows into the region, reigniting inﬂationary
pressures and increases in asset prices. Growth in developing East
Asia will accelerate to 7.6 percent next year, with China expanding
8.1 percent, as domestic demand is boosted by accommodative
policies, the World Bank said.
Source: Bloomberg, October 8, 2012
IMF Sees ‘Alarmingly High’ Risk of Deeper Global
Slump
The International Monetary Fund cut its global growth forecasts as
the euro area’s debt crisis intensiﬁes and warned of even slower
expansion unless oﬃcials in the U.S. and Europe address threats
to their economies.
The world economy will grow 3.3 percent this year, the slowest
since the 2009 recession, and 3.6 percent next year, the IMF said
today, compared with July predictions of 3.5 percent in 2012 and
3.9 percent in 2013. The Washington-based lender now sees
“alarmingly high” risks of a steeper slowdown, with a one-in-six
chance of growth slipping below 2 percent.
The IMF’s 188 member countries convene in Tokyo this week as low
growth damped by ﬁscal consolidation in the richest economies
hurts developing counterparts from China to Brazil. As the IMF
urged measures to boost conﬁdence, uncertainties out of Europe
show no sign of abating, with leaders still divided over a banking
union and Spain resisting a bailout.
Conﬁdence Fragile
European stocks were little changed as the region’s ﬁnance
ministers met in Luxembourg to discuss the sovereign-debt crisis.
The Stoxx Europe 600 Index slipped less than 0.1 percent at 11:02
a.m. in London.
In Seoul, World Bank President Jim Yong Kim told a forum today
that he saw mildly encouraging signs in Europe. In Tokyo, IMF Chief
Economist Olivier Blanchard indicated that yields on Spanish and
Italian bonds, which decreased after the European Central Bank’s
bond-buying plan announcement, could rise if the countries don’t
request bailouts.
The IMF report called for U.S. policy makers to ﬁnd an alternative
to planned automatic tax increases and spending cuts that would
trigger a recession. Europeans must follow on their commitments
for a more integrated monetary union, and many emerging
markets can aﬀord to cut interest rates or pause tightening to ﬁght
oﬀ risks to their economies, the IMF said.
The 17-country euro area economy will contract 0.4 percent this
year, 0.1 percentage point worse than forecast in July, and grow
0.2 percent in 2013, less than the 0.7 percent predicted three
months ago, the IMF said. The U.S. is seen expanding 2.2 percent

12.
INTERNATIONAL NEWS
this year, higher than an earlier forecast, and growing 2.1 percent
next year, less than previously predicted. Japan’s estimate was
cut to 2.2 percent this year and to 1.2 percent in 2013. Spain’s
economy will shrink 1.3 percent next year, 0.7 percentage point
worse than predicted in July. German growth is seen at 0.9 percent
each year, with the 2013 estimate half a percentage point less
than previously forecast. “Spain and Italy must follow through
with adjustment plans that re-establish competitiveness and ﬁscal
balance and maintain growth,” Blanchard wrote in a foreword to
the report. “To do so, they must be able to recapitalize their banks
without adding to their sovereign debt. And they must be able to
borrow at reasonable rates.”
Emerging Economies
Growth forecasts were also lowered for emerging markets, where
domestic factors add to external constraints, the IMF said. Brazil
had some of the steepest cuts, with growth seen at 1.5 percent
this year from 2.5 percent and 4 percent next year. India’s economy
may grow 4.9 percent this year and 6 percent next year, lower than
previous forecasts of 6.2 percent and 6.6 percent respectively.
China’s estimate was cut by 0.2 percentage point each year to
7.8 percent in 2012 and 8.2 percent in 2013. Monetary policy
should remain accommodative in developed economies, with
expectations for slower inﬂation giving the European Central Bank
“ample justiﬁcation for keeping policy rates very low or cutting
them further,” the IMF said. The Bank of Japan may need to ease
further, it said.
Other risks to the global economic outlook in the short term include
a renewed increase in oil prices and an inability to raise the U.S.
debt ceiling, it said. The IMF forecasts assume oil at USD106.18 a
barrel this year and USD105.10 next year, based on the average
prices of U.K. Brent, Dubai and West Texas Intermediate crudes.
That compares with estimates of USD101.80 and USD94.16 in
July.
Japan’s Trade
In economic releases in the Asia Paciﬁc region today, Japan
reported a larger-than-estimated 454.7 billion yen (USD5.8
billion) current-account surplus. In Australia, business conﬁdence
recovered in September as the prospect of interest- rate
reductions overshadowed weaker sentiment among miners and
manufacturers, a private survey showed. In South Korea, the
central bank said today that the nation’s economy faces increased
external risks and the ﬁnance ministry said it will step up eﬀorts to
boost growth. In Europe, the U.K. may report today that industrial
production fell in August, a Bloomberg News survey of economists
indicates.
Source: Bloomberg, October 12, 2012
Trade Slows Around World
Declining Growth in Exports Dims Prospects for U.S. Economy;
Europe Cuts Imports. Global trade is stalling, dimming prospects
that exports will buoy the U.S. economy in the coming months.
Trade rebounded after its collapse in the recession. Now several
indicators of export activity are ﬂashing red as Europe’s recession,
anemic U.S. growth and the slowing Chinese economy damp
exports world-wide.
The World Trade Organization just projected the global volume
of trade in goods would expand only 2.5% this year, down from
5% last year and nearly 14% growth in 2010. A Dutch government
agency, the CPB Netherlands Bureau for Economic Policy Analysis,
estimates it fell outright in June and July. “The problems of the
advanced economies, particularly the euro zone, are being spread
around the world,” said Andrew Kenningham, senior global
economist at Capital Economics, a London-based consulting group.
“Everybody is being dragged down.”
The trade shift could take a particularly big toll on the U.S. economy.
Exports had been, until recently, “a stunningly strong driver of
growth,” said Tom Porcelli, chief U.S. economist at RBC Capital
Markets. Exports have accounted for almost half of U.S. growth
during this recovery, compared with an average of 12% of growth in
economic cycles over the past four decades, he said. The slowdown
also could thwart the Obama administration goal of doubling U.S.
exports in the ﬁve years following the end of the recession in 2009.
President Barack Obama has held up the goal as key in his eﬀort to
boost U.S. manufacturing and create more jobs.
The trade slowdown could worsen as momentum slips across the
global economy. The International Monetary Fund is lowering
its forecast for global economic growth to just over 3% this year,
according to projections to be released at its annual meeting in
Tokyo next week. Europe is the epicenter of the weakness radiating
through the global economy. Chinese exports to the European
Union—until last year its largest export market—have fallen 5%
so far this year through August. Weak exports have exacerbated a
slowdown in China’s domestic economy, which economists project
will grow around 7.5% this year, which would be the weakest
annual expansion since 1990.
China’s manufacturing sector contracted for the second straight
month in September, the government reported Monday,
underscoring the troubles in the world’s second-largest economy.
A separate HSBC/Markit survey of China’s manufacturers released
Saturday found orders for new exports in September hit a 42month low. This slowdown is curbing exports to China from other
Asian countries, such as Singapore and Thailand, which provide
components for goods that end up in the hands of European
consumers. Japanese exports to Europe also are tumbling. U.S.
exports to the European Union fell in July after largely holding
up for two years, while overall export growth slowed to a trickle
this summer. The Port of Los Angeles, the nation’s largest, said the
volume of loaded outbound containers fell 10.5% in August from
a year earlier.
U.S. manufacturers’ new export orders declined for three straight
months through August, ending three straight years of expansion,
according to a survey from the Institute for Supply Management.
While Europe is the main problem, demand also is slowing
elsewhere. China is struggling to boost domestic demand while
preventing broader economic damage from an overheated realestate sector. The U.S. remains under strain as households cut
debt and limit their spending, while concerns about U.S. budget
policy hang over businesses. Japan’s sluggish economy is being
weighed down by a climbing currency that makes its exports more
expensive overseas.
Global trade had grown an average of 6% a year over the past two
decades, faster than the overall global economy, as globalization
opened markets and led to integrated global supply chains.
Outright declines in world trade volumes are rare. Apart from the
severe 12% drop in 2009, total world trade declined only three
other times in the past half century. Unlike 2009, when trade
seized up globally, there are pockets of strength today.
The U.S. market has been a relative bright spot for China. Exports
from China to the U.S. are up 10% so far this year. While that is
slower than in past years, it is enough to make the U.S. China’s
biggest export destination so far this year, beating out the EU for
the ﬁrst time since 2006. Still, at China’s biggest ports, volumes
are falling. Shanghai, the world’s largest port by volume, saw a 6%
decline in shipping containers passing its quays in August compared
with the year earlier. “Exports continue to be a challenge,” said
Ming Mei, chief executive of Global Logistic Properties, which
owns warehouses in China and Japan.
Similar pressures can be seen elsewhere in Asia. Sri Lanka had been
experiencing strong export growth since the end of the civil war
in 2009 and a shift of production away from China where wages
are rising quickly. But now it appears the island nation’s apparel
exports will drop this year, said A. Sukurman, head of Sri Lanka’s
Joint Apparel Association Forum, a trade group, and owner of Star
Garments Ltd., a supplier to brands such as Abercrombie & Fitch,
Ann Taylor and Lands’ End.
Source: The Wall Street Journal, October 1, 2012
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11

15.
NATIONAL ECONOMIC INDICATORS
million in July 2012. This is also lower by 3.07 percent compared to
August 2011 position. Import payments during July-August 2012
stand lower by 3.30 percent to USD 5311.60 million against the
amount of the same period of the previous ﬁscal.
Of the total import payments during the period under review,
imports under Cash and for EPZ stand at USD 4875.90 million,
imports under Loans/Grants USD 3.80 million, imports under
direct investment USD 18.90 million and short term loan by BPC
USD 413.00 million.
Total Tax Revenue
Total tax revenue collection in July, 2012 stood at BDT 6778.15
crore which is higher by 17.68 percent against the collection of
BDT 5845.80 crore in July, 2011. NBR tax revenue collection during
July-September 2012 was BDT 20894.12 crore which is higher by
BDT 2802.85 crore or 15.49 percent against the collection of BDT
18091.27 crore during July-September 2011. Target for NBR tax
revenue collection for FY 2012-13 set at BDT 112259.00 crore.
Sale of NSD during July-September 2012 stood at BDT 5997.05
crore which is 35.34 percent higher than the amount of sale in
the same period preceding year. Net borrowing of the government
through NSD certiﬁcates during July-September 2012 stood at
BDT 453.12 crore against BDT 498.41 crore during July-September
2011.
Outstanding borrowing of the government through NSD certiﬁcates
as of end September 2012 stood at BDT 64370.46 crore which was
higher by 0.68 percent against the amount outstanding at the end
September 2011.
•
•
Total liquid assets of the scheduled banks stands higher at BDT
126879.53 crore as of end August 2012 against BDT 125444.21
crore as of end June 2012. Required liquidity of the scheduled
banks also stands higher at BDT 83464.03 crore as of end August
2012 against BDT 79768.02 crore as of end June 2012.
Scheduled banks holding of liquid assets as of end August 2012
in the form of Cash in tills & Balances with Sonali bank, Balances
with Bangladesh Bank, and Unencumbered approved securities
are 6.39 percent, 31.82 percent and 61.78 percent respectively of
total liquid assets.
State Owned Banks
Private Banks
Private Islamic Banks
Foreign Banks
Specialized Banks
Total
•
•
Required Total Liquid
Liquidity
Asset
(SLR)
22207.68
36333.25
40217.94
61570.27
9188.21
13445.20
5893.93
12247.13
2260.26
3283.68
79768.02 126879.53
38239.19
60224.32
13386.17
10222.31
3372.22
125444.21
Aid Disbursement
Aid disbursements in the ﬁrst two months of FY13 was higher by
USD 196.14 million to USD312.90 million which will also reduce
BOP pressure and will help build up reserves.
•
Foreign Exchange Reserve (Gross)
Gross foreign exchange reserves of the BB stood at USD 12244.70
million as on 29 October 2012, against USD 11252.06 million at the
end of September 2012.
The gross foreign exchange balances held abroad by commercial
banks stood higher at USD 1287.88 million by end September 2012
against USD 1192.34 million by end August 2012. This was also
higher than the balance of USD 991.10 million by end September
2011.
As on end June, 2012
As of end August,
(BDT in crore)
2012 P (BDT in crore)
Total Liquid
Asset
Remittances
Remittance receipts in the ﬁrst quarter of FY13 increased by 19.71
percent to USD 3558.63 million compared to the growth of 11.80
percent during the same period of FY12. In September 2012,
remittances was USD 1.18 billion, recorded an increase of 37.80
percent over September 2011.
Liquidity Position of the Scheduled Banks
Bank Group
Exports
Merchandise exports in September 2012 stands lower by USD
50.59 million or 2.59 percent at USD 1900.89 million as compared
to USD 1951.48 million in August 2012. However, the September
2012 earning is higher by 31.33 percent than the export value of
September 2011, exceeding the target by 1.33 percent.
Required
Liquidity
(SLR)
23594.90
41790.42
9704.72
5938.96
2435.03
83464.03
•
Exchange Rate Movements
At the end of September 2012 Taka has appreciated by 0.28 percent
from its level at the end of June 2012 resulted from moderate
growth in remittances, foreign aid, and low import pressures. On
the other hand, during the same period, Indian Rupee appreciated
by 5.18 percent.
(Source: Major Economic Indicators: Monthly Update, October 2012)
Imports
Import payments in August 2012 stand lower by USD 358.60 million
or 14.48 percent to USD 2476.50 million, against USD 2835.10
Rate of InﬂaƟon (Base: 1995-96, 100)
Monthly Average Call Money Rates (Weighted Average)
12.00%
25.00
11.50%
11.00%
Percentage
20.00
15.00
10.00
10.50%
10.00%
9.50%
9.00%
8.50%
5.00
Lowest Rate
Average Rate
Sep 12
Aug 12
July 12
June 12
May 12
Apr 12
Feb 12
Highest Rate
Mar 12
Jan 12
Dec 11
Oct 11
Nov 11
8.00%
-
7.50%
7.00%
Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 June 12 July 12 Aug 12 Sep 12
Point to Point Basis
12 Month Average Basis
Rate of Inﬂation on CPI for
Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 June 12 July 12 Aug 12 Sep 12
National (Base: 1995-96, 100)
Point to Point Basis
11.29% 11.97% 11.42% 11.58% 10.63% 11.59% 10.43% 10.10% 9.93% 9.15% 8.56% 8.03% 7.93% 7.39%
12 Month Average Basis
9.43% 9.79% 10.18% 10.51% 10.71% 10.91% 10.96% 10.92% 10.86% 10.76% 10.62% 10.37% 10.08% 9.69%
Source: Major Economic Indicators
Monthly Average Call Money Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 June 12 July 12 Aug 12 Sep 12
Market Rates (wt avg)
Highest Rate
20.00 20.00 19.00 23.00 22.00 22.00 22.00 18.00 17.50 18.00 17.00 17.00 16.00 13.00
Lowest Rate
6.50
5.00
6.00
6.25
6.25 8.00
6.75
6.00 6.75
7.75
9.25 5.00
4.25 3.00
Average Rate
12.03 10.41
9.77 12.70 17.15 19.66 18.18 12.51 13.98 15.05 15.02 10.58 11.51 9.81
Source: Economic Trends Table XVIII (Call Money)
14
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